Nick wants to set up an investment account for his nephew to contribute annually, creating a nest egg for college since the parents are already opening a 529. He’s unsure whether a standard brokerage account, IRA or other options work best when you’re not the parent.
Diana asks whether she needs TIPS in her portfolio to protect against inflation. Or can she just rely on other investments that outpace inflation?
She’s also wondering about the tax implications of TIPS ETFs. This matters during her peak earning years.
Prethive asks whether he should switch from Roth to Traditional 401(k) contributions. When he retires, he wants to move to a tax-free state. Or maybe move abroad.
He wonders if moving to avoid state taxes in retirement would save more money long-term.
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Nick: What’s the best way to set up an investment account as a gift for my nephew? Should I go with a standard brokerage account? An IRA? Or what other options do I have since I’m not his parent?
I recently became an uncle and want to give my nephew an investment account that I can contribute to year over year, creating a nest egg for when he gets to college. His parents are already opening a 529 for him, so I was considering a standard brokerage account but wasn’t sure if that’s the optimal approach.
Diana: Do I need a TIPS ETF in my portfolio to protect my retirement savings from inflation? And if TIPS are the way to go, what should people in their peak earning years do to deal with the tax implications?
I’m wondering if I can compensate for inflation simply by adjusting the rest of my portfolio to investments that return at a rate exceeding inflation. I’m sort of confused by this strategy versus using Treasury Inflation-Protected Securities.
Prethive: Should I be choosing a traditional or Roth 401(k) when it comes to state taxes? What happens with state taxes on a pre-tax 401(k) if someone moves abroad? Could this geographic tax strategy really add up to significant savings over time?
Some states don’t tax income at all, while others specifically don’t tax retirement income. So what if people just do pre-tax contributions their whole career, then strategically move to one of these tax-friendly states when they retire?
If someone lives in a no-tax state, then decides to retire overseas, would they essentially escape state taxes entirely? Right now we’re in the 12% tax bracket and have been doing Roth contributions, but I’m wondering if we should switch to pre-tax contributions and then make our retirement move to a tax-friendly state or even retire abroad.
Is this worth the mental energy, or should I just stick with Roth contributions?
Resources Mentioned:
affordanything.com/assetlocation
treasurydirect.gov
stackingbenjamins.com/hsa
Interview with Nick Maggiulli about the wealth ladder
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